1. March 8, 2013 Office of Retirement Services Serving more than 530,000 customers Michigan Public School Employees Retirement System

2. Agenda  MPSERS Reform – Implementation Update  Contribution Rates  Retirees Returning to Work – PA 464 of 2012  GASB 68

3. Thank you!  Employer Outreach to the Members:  100% validation of members to be given an election  Provided contact information and assistance reaching members  Made personal contacts, hosted seminars and computer labs  86.7% of members logged in to miAccount  82% of members made their elections

4. Implementation Update  We have now implemented PA 300 of 2012!  Over 215,000 members given an election – all had a Healthcare Election; 193,500 had Pension Election.

5. Implementation Update Election Results  Pension Election:  Option 1/Maintain 1.5%: 28%  Option 2/Maintain 1.5 until 30 YOS: 3%  Option 3/Switch to 1.25%: 65% (elected or defaulted)  Option 4/Switch to DC: 4%  Healthcare Election  Premium Subsidy: 89% (elected or defaulted)  Personal Healthcare Fund: 11%

6. Implementation Health Care Contributions  3% Retiree Healthcare Contribution falls into two categories  3% contributions continue for those who elected Graded Premium Subsidy  3% contributions stop as of transition date for those who elected Personal Healthcare Fund  PHF participants received a contribution to their 401(k) equal in value to the amount of their 3% HCC contributions on March 1, 2013.  PHF are fully vested in this 401(k) contribution.  Account will be set up for them at ING.

7. Contribution Rates

8. Employer Contribution Rates February 1, 2013 – September 30, 2013 Basic/MIP With Premium Subsidy Pension Plus With Premium Subsidy Pension Plus PHF Pension Plus to DC with PHF Basic/MIP to DC With Premium Subsidy Basic/MIP to DC With PHF Basic/MIP With PHF *DB Retirees Returned to Work *DC Retirees Returned to Work DB CONTRIBUTIONS PENSION CONTRIBUTIONS Pension Normal Cost2.43%2.24% 0.00% 2.43%0.00% Pension UAAL*11.42% Pension Early Retirement Incentive 1.36% Pension Total Rate15.21%15.02% 12.78% 15.21%12.78% HEALTH CONTRIBUTIONS Health Normal Cost0.93% 0.00% 0.93%0.00% Health UAAL*8.18% Health Total Rate9.11% 8.18% 9.11%8.18% DTL2 Records DB Contribution Total 24.32%24.13%23.20%20.96%21.89%20.96%23.39%20.96% DC CONTRIBUTIONS DC Employer Contributions0.00%1.00% 3.00%4.00% 0.00% 4.00% Personal Healthcare Fund0.00% 2.00% 0.00%2.00% 0.00% DTL4 Records DC Contribution Total 0.00%1.00%3.00%5.00%4.00%6.00%2.00%0.00%4.00%

9. Employer Contribution Rates FY 2013-2014 - Effective October 1, 2013 Basic/MIP With Premium Subsidy Pension Plus With Premium Subsidy Pension Plus PHF Pension Plus to DC with PHF Basic/MIP to DC With Premium Subsidy Basic/MIP to DC With PHF Basic/MIP With PHF *DB Retirees Returned to Work* *DC Retirees Returned to Work* DB CONTRIBUTIONS PENSION CONTRIBUTIONS Pension Normal Cost2.90%2.67% 0.00% 2.90%0.00% Pension UAAL* 14.08% Pension Early Retirement Incentive1.36% Pension Total Rate18.34%18.11% 15.44% 18.34%15.44% HEALTH CONTRIBUTIONS Health Normal Cost0.93% 0.00% 0.93%0.00% Health UAAL*5.52% Health Total Rate6.45% 5.52% 6.45%5.52% DTL2 Records DB Contribution Total 24.79%24.56%23.63%20.96%21.89%20.96%23.86%20.96% DC CONTRIBUTIONS DC Employer Contributions0.00%1.00% 3.00%4.00% 0.00% 4.00% Personal Healthcare Fund0.00% 2.00% 0.00%2.00% 0.00% DTL4 Records DC Contribution Total 0.00%1.00%3.00%5.00%4.00%6.00%2.00%0.00%4.00%

10. Employer Contribution Rates FY 2014-2015 - Effective October 1, 2014 Basic/MIP With Premium Subsidy Pension Plus With Premium Subsidy Pension Plus PHF Pension Plus to DC with PHF Basic/MIP to DC With Premium Subsidy Basic/MIP to DC With PHF Basic/MIP With PHF *DB Retirees Returned to Work *DC Retirees Returned to Work DB CONTRIBUTIONS PENSION CONTRIBUTIONS Pension Normal Cost4.31%3.23% 0.00% 4.31%0.00% Pension UAAL* 17.40% Pension Early Retirement Incentive1.36% Pension Total Rate23.07%21.99% 18.76% 23.07%18.76% HEALTH CONTRIBUTIONS Health Normal Cost0.51% 0.00% 0.51%0.00% Health UAAL*2.20% Health Total Rate2.71% 2.20% 2.71%2.20% DTL2 Records DB Contribution Total 25.78%24.70%24.19%20.96%21.47%20.96%25.27%20.96% DC CONTRIBUTIONS DC Employer Contributions0.00%1.00% 3.00%4.00% 0.00% 4.00% Personal Healthcare Fund0.00% 2.00% 0.00%2.00% 0.00% DTL4 Records DC Contribution Total 0.00%1.00%3.00%5.00%4.00%6.00%2.00%0.00%4.00%

11. Retirees Returning to Work - P.A. 464

12. Retirees Returning to Work Why PA464?  Prevents offloading costs onto other reporting units  Ensures retirement system funding stability

13. Retirees Returning to Work Critical Shortage  State Superintendent has defined the list  Any retiree must have been retired for 12 months prior to reemployment  Retirees must be directly hired by the school  School will need to pay UAAL* for pension and health (20.96%)  School must report retiree based on their payroll frequency

14. Retirees Returning to Work  Critical Shortage List Positions  Applies to K-12 school districts, intermediate school districts, public school academies, and charter schools, but not community colleges or district libraries. Who Hired Retiree? Retirement Effective Date Length of Retirement Reporting Unit Action DB Retiree Reporting Unit Action MIP/Basic Conversion to DC Retiree DB Retiree Restrictions MIP/Basic Converted to DC Retiree Restrictions Reporting Unit ONLY Any retirement effective date 12 months or more Reporting unit must report to ORS. Reporting unit must pay 100% of 20.96% UAAL* on earnings. Reporting unit must report to ORS. Reporting unit must pay 100% of 20.96% UAAL* on earnings. Reporting unit must pay 4% employer contribution to 401(k). May work for 3 year period or until July 1, 2014, whichever comes first without an earnings limit.

15. Retirees Returning to Work  Substitute Teachers  Hired directly by Reporting Unit, Third Party Administrator, or Independent Contractor  Must pay the Pension and Healthcare UAAL* (20.96%)  Report earnings to ORS by payroll frequency

16. Retirees Returning to Work  Substitute Teachers  Applies to K-12 school districts, intermediate school districts, public school academies, charter schools, community colleges, and district libraries. Who Hired Retiree? Retirement Effective Date Length of Retirement Reporting Unit Action DB Retiree Reporting Unit Action MIP/Basic Conversion to DC Retiree DB Retiree Restrictions MIP/Basic Converted to DC Retiree Restrictions Reporting Unit or 3 rd Party Vendor or Independent Contractor After July 1, 2010 1 month or more Reporting unit must report to ORS. Reporting unit must obtain earnings from 3rd party vendor or independent contractor and report it to ORS. Reporting unit must pay 100% of 20.96% UAAL* retiree earnings. Reporting unit must report all retirees. Reporting unit must obtain earnings from 3rd party vendor or independent contractor and report it to ORS. Reporting unit must pay 100% of 20.96% UAAL* earnings. Reporting unit must pay 4% employer contribution to 401(k). Subject to 1/3 of FAC earnings limit.

17. Retirees Returning to Work  School Improvement Facilitator or Instructional Coach  Hired by Third Party Administrator, or Independent Contractor  Must pay the Pension and Healthcare UAAL* (20.96%)  Report earnings to ORS by payroll frequency  Hired directly by Reporting Unit  Critical Shortage provisions apply

18. Retirees Returning to Work  School Improvement Facilitator or Instructional Coach Who Hired Retiree? Retirement Effective Date Length of Retirement Reporting Unit Action DB Retiree Reporting Unit Action MIP/Basic Conversion to DC Retiree DB Retiree Restrictions MIP/Basic Converted to DC Retiree Restrictions 1.Reporting Unit (Including community colleges and district libraries.) After July 1, 2010 1 month, but less than 12 months Reporting unit must report all retirees. Reporting unit does not pay UAL. Reporting unit must report all retirees. Reporting unit does not pay UAL. Reporting unit must pay 4% employer contribution to 401(k). Subject to 1/3 of FAC earnings limit. 1.Reporting UnitAfter July 1, 2010 12 months or more Covered under the Critical Shortage Provision (K-12 school districts, intermediate school districts, district libraries, public school academies, and charter schools, but not a community college or a district library.). See A. Critical Shortage chart and notes. Once the Critical Shortage provision no longer applies, the rules revert to see above line item.A. Critical Shortage chart and notesabove 1.3 rd Party Vendor or Independent Contractor After July 1, 2010 Reporting unit (including community colleges and district libraries) must report all retirees. Reporting unit (including community colleges and district libraries) must obtain earnings from 3 rd party vendor or independent contractor and report them to ORS> Reporting unit (including community colleges and district libraries) must pay 100% of 20.96% UAAL* on retiree earnings. Reporting unit (including community colleges and district libraries) must report all retirees. Reporting unit (including community colleges and district libraries) must obtain earnings from 3rd party vendor or independent contractor and report it to ORS. Reporting unit (including community colleges and district libraries) must pay 100% of 20.96% UAAL* on earnings. Reporting unit (including community colleges and district libraries) must pay 4% Subject to 1/3 of FAC earnings limit.

19. Retirees Returning to Work  Core Service applies to those who retired on or after July 1, 2010  If returning to work in a core service position – no change  Retiree employed directly by Reporting Unit – subject to 1/3 earnings limit  Retiree employed directly by entity other than Reporting Unit – forfeit pension and healthcare subsidy until termination

20. GASB 68

21.  Effective for fiscal year 2015.  Liabilities.  Expenses.  Measured as of the plan’s fiscal year end.

22. GASB 68  Accounting (reporting) changes, not required funding changes.  The reporting units will be provided the liability and expense amounts.  What are the most likely allocation methods?  GASB has not yet released the GASB 68 implementation guide. This guide will presumably provide more guidance on acceptable allocation methods.

23. Questions???

24. ORS Contact Information  Employer Reporting  Website: www.michigan.gov/psruwww.michigan.gov/psru  Call Center: 517-636-0166  Andy Kolp  517-636-0143 or kolpa@michigan.govkolpa@michigan.gov  Angie Schrauben  517-322-6547 or schraubena@michigan.govschraubena@michigan.gov

25. ORS Contact Information  Member Website  www.michigan.gov/orsschools www.michigan.gov/orsschools  Member Customer Service  800-381-5111  Member Self Service  www.michigan.gov/orsmiaccount www.michigan.gov/orsmiaccount

26. State of Michigan’s DTMB Office of Support Services  Fleet Services  Printing  Mail & Delivery  Surplus Services  Records Management

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29. Records Management Do you know what paperwork and electronic records you should save? Records Management Analyst Services provides consultation and recommendations of best practices for records management. www.michigan.gov/recordsmanagement State of Michigan’s DTMB Office of Support Services